Question

how far ahead do you think companies should consider to know if an investment is worthwhile?...

how far ahead do you think companies should consider to know if an investment is worthwhile? For example the actual business may not be profitable, but the piece of land on which it is located can grow substantially in value- should this be considered at all in the planning?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

For considering whether an investment is worthwhile companies need to estimate the future cash flows of an investment. Hence the investment or project can only be analysed till the period the cash flows can be estimated.

The piece of land on which the capital project is to be undertaken is actually an opportunity cost and the company needs to consider whether the capital investment for project is more profitable then the appreciation in the value of the land. For instance the land may appreciate by $100,000 whereas the net value added by the capital investment is $50,000. If the project is undertaken the company will not be able to sell the land and hence that becomes an opportunity cost which should be considered in the decision of the capital investment.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
What do you think of eac of these ideas? Do you agree or disagree for each...
What do you think of eac of these ideas? Do you agree or disagree for each one give the answer in full sentences 1. I do find his approach of deductive reasoning as a replacement of inductive reasoning a valid way to define scientific practice because the process is the process no matter if one is proving something right or wrong. I feel it can be applied to all branches and should be because as states in the reading it...
Do you think people at your level in the organization should provide budget inputs, and why...
Do you think people at your level in the organization should provide budget inputs, and why or why not? Stage 1 : What is Budget Planning is the way toward making an arrangement to spend your cash. This spending plan is known as a financial plan. Making this spending plan enables you to decide ahead of time whether you will have enough cash to do the things you have to do or might want to do. Stage 2 : Need...
Do you know that approximately 70% of all trading activity in modern markets consists of computers...
Do you know that approximately 70% of all trading activity in modern markets consists of computers trading against other computers? At the bottom of page 65 in your text, you will see the "NEW TRADING STRATEGIES" section of your chapter. The rise of algorithmic and high-frequency trading have raised all sorts of questions related to speed, fairness, and stability. For example, the Flash Crash, occurring on May 6, 2010, saw the market (i.e. DJIA) fall 1000 points only to partly...
Brief down in at least 200 words of what do you think about the following summary...
Brief down in at least 200 words of what do you think about the following summary of an article related to the impact of COVID-19 on mergers and acquisitions. Include your personal views about the following article summary statement. The article opens up about how this past summer was one of the busiest in decades for mergers and acquisitions. There was more than one trillion worth of transactions around the globe within the third quarter. Because of the pandemic, the...
Costs of Capital vs Opportunity Costs 1.What connection do you think exists between costs of capital...
Costs of Capital vs Opportunity Costs 1.What connection do you think exists between costs of capital and "opportunity costs?" The cost of capital is measured so that you can evaluate the firm’s investment opportunities. In other words, it measures the risks associated with a project. Each project needs to be evaluated for different risk factors. Each of these projects pose a potential opportunity. And each opportunity has a cost that is attached to them. This is how there is a...
QUESTION 1 A code of ethics ________________________________. should be standardized across companies following the AMA guidelines...
QUESTION 1 A code of ethics ________________________________. should be standardized across companies following the AMA guidelines is only necessary for large corporations needs to be vague so that it could be used to understand any potential situation should specify expected behavior in as many potential situations as possible may be more effective in guiding employee behavior than external governmental regulation 1 points   QUESTION 2 For most foods products that are imported into the US from the European Union, companies have...
Government is cleaning up the way companies do business after accounting and governance scandals rocked investor...
Government is cleaning up the way companies do business after accounting and governance scandals rocked investor confidence and damaged the reputation of companies large and small. The Sarbanes-Oxley Act (SOX) of 2002 was enacted in response to the high-profile Enron and World Com financial scandals to protect shareholders and the public from accounting errors and fraudulent practices by organizations. One primary component of the SOX is the definition of which records are to be stored and for how long. For...
Profitability analysis and WalMart's suppliers WalMart, the world's largest retailer, is legendary for squeezing price concessions...
Profitability analysis and WalMart's suppliers WalMart, the world's largest retailer, is legendary for squeezing price concessions and ever greater operating efficiencies from its suppliers. To what extent do such concessions hurt financial performance?* One recent study has found that suppliers identifying WalMart as a primary customer financially underperformed compared to companies that did not identify themselves in this way. Especially revealing is the observation that among the 10 largest suppliers to Walmart in 1994, four subsequently went bankrupt and a...
104 Part One Value bre44380_ch04_076-104.indd 104 09/30/15 12:46 PM MINI-CASE ● ● ● ● ● Reeby...
104 Part One Value bre44380_ch04_076-104.indd 104 09/30/15 12:46 PM MINI-CASE ● ● ● ● ● Reeby Sports Ten years ago, in 2007, George Reeby founded a small mail-order company selling high-quality sports equipment. Since those early days Reeby Sports has grown steadily and been consistently profitable. The company has issued 2 million shares, all of which are owned by George Reeby and his five children. For some months George has been wondering whether the time has come to take the...
The assignment summary sheets will be submitted week 14 with Test 3. You are to personally...
The assignment summary sheets will be submitted week 14 with Test 3. You are to personally experience the power and satisfaction of developing these skills firsthand and to reflect and write about this experience. Over the years, many students have shared amazingly rewarding experiences as they worked on these skills. The assignment will be evaluated and be weighted as 5% of your final mark (together, they are worth 20% of your mark for Test 3, which is worth 25% of...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT